EUR/USD: PMI, ZEW, Minutes and PCE, the week for currency traders is busy

(News Bulletin 247) – Market psychology remained unchanged on the Euro/Dollar currency pair at the beginning of the week, with on the one hand a Euro which was resisting profit taking against a backdrop of barely any risk appetite undermined by rising rates; and a Dollar which was pushing, for its part, since the interventions of various Fed executives, in favor of maintaining a relatively firm monetary policy.

“Proponents of the ‘persistent inflation’ scenario cited the strength of the labor market, easing financial conditions and the V-shaped rebound in Chinese economic growth. To support the thesis of the persistence of inflation, the other set of data to be released was the January Purchase Price Indices (PPIs), which together are considered a leading indicator of future consumer prices.” reads in a weekly market commentary from Muzinich & Co.

As a reminder on Thursday, the producer price indices for the month of January in the United States, well above expectations (+0.7%), as are the weekly registrations for unemployment benefits, below 200,000 new units , have once again shown, as leading inflation indicators, the strains on the economic machine. A new reminder for the Fed that maintaining a firm monetary policy throughout 2023 will be essential.

Since then, traders haven’t had any sharp US statistical releases to chew on, especially as Wall Street remained closed yesterday due to a holiday. Fed Minutes and then PCE prices will be hot spots on the calendar on Wednesday and Friday, respectively. To be followed at 3:45 p.m. the American services and industrial PMIs in advanced data for January, as well as sales of existing homes at 4:00 p.m.

In the immediate future on the European side, a battery of PMIs has just been published, below expectations for industry and above for services, for synthetic data for the monetary union. The ZEW index of confidence in the German economy, at 28.1, for its part largely exceeded the target. ZEW Chairman Prof. Achim Wambach made the following comments alongside the raw survey data: “A large proportion of survey participants expect the economic situation to improve in the next six months. However, the current situation is still rated relatively unfavourable.As in the previous month, the rise in expectations can be attributed to higher earnings expectations in the energy and export sectors as well as in the consumption-related economy. Expectations for long-term interest rates are also rising and the banking sector indicator has reached its highest level since 2004.”

At midday on the foreign exchange market, the Euro was trading against $1.0655 approximately.

KEY GRAPHIC ELEMENTS

After gradually weakening from February 6 to 14, the 50-day moving average (in orange) ended up giving way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). The sell signal would then gain in intensity if necessary. The crossings of these two remarkable moving averages have been providing excellent positioning and trade monitoring signals for many months.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0645 USD and the resistance at 1.1045 USD.

CHART IN DAILY DATA